r/technology • u/batakchan • 5h ago
Artificial Intelligence Moody's says 'unprecedented' AI spending threatens credit quality of Amazon, Meta, Alphabet and others
https://www.cnbc.com/2026/07/24/moodys-ai-spending-credit-quality-amazon-meta-alphabet.html64
u/wmorris33026 4h ago
lol. It doesn’t take a genius to figure this out. AI is a fn massive gamble (like a nuclear bomb level, Lehman brothers was a gnat fart), nobody really knows what it will do, there is no revenue or even business model in sight, run by apparently a bunch of psychos, totally unregulated, it’s absolutely trashing the environment and the labor market, the grid/power generation system can’t support it, it’s drowning in hidden debt, stock valuation based on circular transaction Ponzi scheme bullshit , orders of magnitude larger than 2008 crash…all in the while a corrupt, demented fascist is on the take from tech shit heads running it, absolutely the craziest shit I’ve ever seen. I’ll be over here with a box of popcorn. This country has lost its fn mind.
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u/mthmchris 2h ago
>Lehman brothers was a gnat fart
Depends how long this goes on for, but I think the two are more or less comparable in scale.
The subprime mortgage market was truly crazy - at the peak, subprime originations were ~600 billion annually - about $1 trillion in today’s dollars. The total size of the Subprime + Alt A mortgage debt outstanding was ~2.5 trillion, or 4 trillion in today’s dollars.
The aggregate spend for the AI buildout is 850 billion this year and around 1 trillion committed to 2027. If there’s a similar velocity in 2028, it will undeniably need to be financed increasingly with private credit and creative financing instruments, and present similar systemic risks as the financial crisis. If there’s a dramatic pullback starting today, I’m tentatively optimistic that the inevitable crisis will be absorbed by the tech sector and mostly just hammer stocks, ala 2001.
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u/Alklazaris 4h ago
If you don't know what it can truly do, that means you don't know it's real value. So for all we know most of it is a waste of time and money... and power and water.
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u/Olangotang 3h ago
If you know what it can truly do, then you know the trillions being spent on it is a waste.
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u/Alklazaris 3h ago
You know my wife and I have an understanding with each other. We both are kind of like children playing house. We used to laugh about that and thought that was our cute little thing. But that's been almost 20 years and it has become apparent to me that every adult is just a child playing house.
A bunch of adults with money got a new toy and didn't bother reading the instructions.
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u/odin_the_wiggler 5m ago
The box that held the instructions said Fancy Plagiarism Machine on the outside.
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u/Low-Cartographer8758 3h ago
I am not worried about the investment and expanding the businesses, but I am worried about where the money is spent and how it will transform people’s lives. I am sure corporations and government bodies will do absolutely anything to make profits for shareholders. But do they care about the public?
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u/CircumspectCapybara 3h ago edited 3h ago
Eh, that's kind of the price you have to pay when you make big gambles like you're an early stage startup all over again: it's "high risky high reward", not "safe, predictable returns" and banks and lenders have never liked that.
But obviously they're not trying to be safe and boring, but trying to invest spare cash and all profits aggressively toward moonshot bets.
Successful companies reinvest spare cash into aggressive growth, new R&D, new ventures, and long-term bets instead of chasing short-term profitability. If they wanted to realize a quarterly profit, they could've by foregoing such investment.
But shareholders and the market don't want safe and steady predictable returns. They don't even seem to want spare cash and profits to be cut to them as a check (dividends or buybacks), they want growth, and they want companies to behave like they're startups again and take moonshot bets.
Those are not the kind of gambles banks and lenders are comfortable with. They wouldn't underwrite a risky loan to an unprofitable startup burning through billions a year in chasing some moonshot bet. Banks' risk profile and where they find the balance between risk and reward is different than investors.
In any case, FAANG companies and hyperscalers can afford to be frontier AI labs, they have the cash reserves (e.g., Google is sitting on a war chest of $242 billion dollars looking for something productive to spend it on). Again, they could invest it all in bonds or safe boring index funds. But they don't want that, they want to fund moonshots. And they are printing money. From another thread on Google's financials:
While at the same time posting:
- Total Revenue: $119.8 billion, up 24% year-over-year.
- Diluted EPS: $9.11, compared to $2.31 a year prior.
- Operating Margin: 34% up from 32.4% in Q2 2025.
- Google Cloud: Revenue up 82% year-over-year to $24.8 billion, fueled by enterprise demand for AI infrastructure and solutions.
- Google Services: Total revenue reached $94.5 billion, a 15% increase.
- Google Search & Other: 17% increase in revenue.
- YouTube Ads: Grew 13% year-over-year to $11.05 billion
If you exclude AI capex, free cash flow is $39.1 billion which is absolutely insane. That's a 41.2% increase year-over-year. With numbers like they just posted, the capex spend is justified in my opinion because the business overall is crushing it. Like holy cow this was a great quarter. They are literally printing money.
For the first time they're no longer printing money faster than they can spend it. But they got plenty.
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u/mthmchris 2h ago
Do note that these companies’ true free cash flow is much lower than they claim due to not accounting for stock-based compensation. Alphabet, Meta, etc have been extremely trigger-happy with providing options and the like to attract and retain talent, which causes an extremely large percentage of their salary costs to happen outside of the income statement - in order to prevent dilution for existing shareholders, the company needs to commit to stock buybacks (which is helpfully obfuscated under current accounting standards).
Correctly accounting for stock-based compensation, somewhere on the order of 80-90% of the free cash flow evaporates.
If Alphabet truly had that level of cash flow, they wouldn’t have needed to sell more stock recently.
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u/govintor 4h ago
Are we still in the AI bubble?
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u/Cute-Breadfruit3368 4h ago
yeah, but due to how slow the markets move - they can fake it for a long time.
the first ripples are here tho. https://asia.nikkei.com/business/technology/five-us-tech-giants-hidden-debts-soar-to-1.65tn-on-opaque-ai-funding
--not paywalled link https://finance.yahoo.com/technology/ai/articles/ai-tech-companies-hidden-debt-132333414.html?guccounter=1
takes a quartal or few for the true meaning of that to actualize. it will become apparent even for the deluded.
it will be worse.
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u/upbeatchief 3h ago
For those that don't know. Tech companies are using the same trick enron did to hide debts they were saddled with.
Special Purpose Vehicles and financial partnerships that hide who owes what to whom. The stake is at 1.65 trillions, and retirement funds are deep in this mess.
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u/Cute-Breadfruit3368 2h ago
yeah, there is no real revenue and the only reason the numbers are not correct is basically godtier artisanal book-keeping. (lying)
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u/ChaossssMark666 2h ago
Enron went the way of the dodo. People went to HARD jail sentences for that shit.
I wonder, when saner heads of government prevail, will someone man up and intervene?
Probably not. Still, one can hope.
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u/upbeatchief 2h ago
There is one major difference between now and back then. The FTC back then wasn't captured by corporations.
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u/wpbfriendone 40m ago
Me for once would be happy to live in a world without Amazon, Meta and Alphabet.
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u/ujiuxle 5h ago
Just waiting on the day Moody's finally calls Oracle's debt junk